Photo: My colleague's condo that is not selling.
By Stefan Aarnio
Today I was flying from Winnipeg to Chicago with a colleague of mine and we were talking about business building and namely flipping houses for profit.
My colleague mentioned that he was having trouble selling his condo that had been sitting on the market for quite some time.
He initially put his condo on the Winnipeg MLS with a competent realtor at $120,000. The condo is between 400 and 500 square feet, 1 bedroom, located in downtown Winnipeg and has no parking.
The comparables for the condo indicated that it could be sold for $120,000.
Since Winnipeg is a semi-hot market, the realtor listed the condo at $99,000 hoping to get a bidding war.
However, the condo has sat on the market for 5 months with little to no interest.
There is absolutely nothing wrong with the condo, it's cosmetically appealing, priced well and should theoretically sell quickly on the market.
However, serious buyers have avoided this condo for 5 months.
The price dropped from $99,000 to $95,000. Next it dropped from $95,000 to $89,900 firm. Yesterday, my colleague got an offer for $80,000 and his realtor was suggesting that he close at $85,000.
What went wrong with the well priced, cosmetically appealing condo in Downtown Winnipeg? It hasn’t sold even though it is priced $20,000 under comparable value.
I asked my friend if the condo had parking, he replied “no”. Immediately, I knew what the issue was.
I asked him what the demographics were like in the building and he said that it’s composed of mostly students who take the bus to the local university.
At $99,000 or less, this condo is very well priced and a good product, however, no parking and the downtown location create two problems:
1) Downtown locations have no peripheral street parking.
2) If the condo doesn’t come with parking, there is nowhere to park the buyer’s car.
People who can qualify for mortgages have jobs, which usually require cars, which require parking. No parking is a huge issue and limits the profile of buyers who would find this product attractive.
Further, the purchasing power of a person looking to buy a condo in the $100,000 to $150,000 range is too great. There are far too many options in the condo market in Winnipeg in that price range and a buyer can easily get a new condo, with parking, in a location of their choice.
My colleague’s product is a nice product, however, his audience is very limited and the people who would like to purchase the product (namely students) do not have the money or purchasing power to buy.
A rule I have learned in my career thus far: The people who are very enthusiastic about buying usually have no money.
I used to see examples of this rule all the time when I used to rent out my affordable luxury rental suites. People that were the most eager to buy had no purchasing power. Another challenge was the people who actually had cash had a wide range of options and really needed to be sold to buy.
To capture a person with purchasing power, you need to offer the best product at the right price and make your option the only option in the category. My friend with no parking will have a very hard time competing in his category.
When I began my business career, I would create a product I liked and would attempt to build or engineer an audience for it. This formula was extremely painful for me. I lost money numerous times and felt the crushing defeat of failure after failure while trying to create markets for my products. Creating a market and demand for a product is very expensive, very intense and very risky. I would not recommend it to anyone.
BUSINESS RULE: Do not try to create an audience, find an audience and give them what they want.
Today in my career, Instead of creating a audiences, I find audiences who are looking for specific products and offer them what they are looking for.
This subtle difference has made the difference between the failures of my past and my current successes.
For example, 2 years ago, rental vacancy in Winnipeg was 0.7% so I built affordable luxury rental units to fill the demand. The units were quickly absorbed by the market and have been 100% occupied since day one. I found an audience and gave them what they wanted.
In January this year I noticed that there were a local investors looking for good cash flowing Real Estate Deals. I made it my mission to find them Deals, partnered with them and have done 12 Joint Ventures this year. Finding partners has not been hard because I fill the demand of the audience.
In the Real Estate Investor world I am approached weekly for mentoring, coaching as well as speaking. I did not get into Real Estate to be a speaker, coach or mentor, but I have started offering services as the demand dictates. If the audience wants coaching, I offer them coaching, if they do not want coaching, I do not offer them coaching. I absolutely hate risk, so I will not invest my time into something that people do not want.
I have also noticed that there is a huge audience of investors on the Internet searching for information. To feed this demand, I have been providing valuable, organic daily blog content to the audience and the results have been overwhelming. My blog has become my secret sauce.
The lesson that I have learned from my experiences is to know your audience inside and out. Know what they want, know what they don’t want and make sure you deliver at the right price. I no longer create speculative products and services because the risk is too high and it’s the formula for failure.
The formula for no risk profits is very simple. Find an audience, connect with them, find out what they want and deliver it at the right price.
You don’t have to be a genius to figure out the formula above and that’s why the best entrepreneurs in the world are middle school/high school/college dropouts:
Business is a simple game, keep it simple.
Thanks for reading,
Thanks for reading,
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